Refinancing your home’s mortgage can save you countless sums of money if you’re currently locked into a high-interest rate agreement. Mortgage refinancing is often done to extend the length of a loan term, get a better interest rate or to simply change mortgage brokers. Unfortunately for some, refinancing comes at a cost, and the outcome is not always desirable to the recipient of the loan. There have been many cases in recent years where people have refinanced to avoid foreclosure, only to find it becoming an even bigger problem when they get locked into a sub par agreement.
Here are some methods you can utilize to find the lowest mortgage refinance rates:
Get that Credit Score Up
Any loan or mortgage company is going to look at your credit score before anything else. Your credit score gives a pretty solid view of your financial past and level of responsibility. Low credit scores are often the result of bad investments, unpaid credit cards and delinquent loan payments. Mortgage companies see these issues and could deny your refinance because they simply don’t trust you enough to pay back the loan. Raising your credit score takes time, but it’s better to slowly work on increasing it than sit back and idly watch those loan denials come in.
You can raise your credit score by being current on all credit card and loan payments, consolidating debts to lower costs and by removing errors on your credit report by contacting the Federal Credit Bureau.
Raise the Value on Your Home
If you’re asking for a refinance loan at a lower price than what your home is worth, you’re more than likely going to receive what you ask for. Mortgage companies often use what is known as a loan-to-value ratio. This means that they assess your home’s value and will only hand out a loan for what the appraisal has been established for the property. You can do a number of things to increase the overall value of your property such as landscaping, structural repair and aesthetic restoration.
Have All of the Necessary Paperwork
Refinancing your home mortgage often requires two year’s worth of federal income tax returns, recent pay stubs and bank account information. If you invest in stocks and bonds, you’ll also need to bring in all of this documentation. Failure to present this paperwork will not only hold up the process of refinancing, but some banks will even deny your loan before it can be assessed because it is wasting their time to wait for you.
Be a Smart Shopper
Let’s face it, there is a sea of mortgage companies all promising that they offer the lowest rates. The lowest rate can only be found if you first sift through the plethora of companies that you’ve discovered. An average refinancing rate is currently at 4.00 percent. Anything above this is too much and will result in a hefty monthly mortgage payment that makes refinancing useless. A rate below this point is excellent and will help the process of refinancing pay off. Some companies will tell you upfront what their refinancing rates are, but others will require a short initial application to even get to that point.
Know the Process
Refinancing your mortgage is a lot like taking out a brand new loan because, essentially, this is exactly what you’re doing. You are simply replacing your old loan with a new, lower-cost option. Because of this, you’ll need all of the same paperwork you brought in when initially applying for your mortgage. Before wasting your time making a trip to the bank, contact them beforehand and get a checklist of all the documentation you’ll need. Once you apply for the refinance loan, you should hear back from the lender within a couple of weeks to say if you’ve been approved or denied. It’s important to only apply for one refinance at a time to avoid receiving duplicate approvals.
Refinancing your loan is great for the average homeowner who is struggling to stay afloat and avoid foreclosure. Before signing any important paperwork, make sure you’re getting the best rate pertinent to your current credit score.